A Sustained Decline in Corporate Insolvencies Albeit with Regional Differences

With the exception of the crisis years 2008 and 2009 the number of Germany’s corporate insolvencies has declined steadily from its peak in 2003. Indeed, 2016 is expected to set a new record low for the new millennium of only 22,000 bankruptcies.

Two causes can be identified for this substantial fall: at the federal and state levels economic growth has proved a decisive factor, while for individual enterprises growing equity ratios have had a benevolent influence. On the other hand, the declining number of insolvencies has been accompanied by a similar drop in the number of start-ups. As a result, the ratio of start-ups and closures to the total number of companies, known as the turbulence rate, is also decreasing, possibly signalling a decline in modernization of the German economy.